By Dr Linda Yueh, Economist at Oxford University, London Business School, and LSE IDEAS, and author of “The Great Economists: How Their Ideas Can Help Us Today”
This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.
The immediate shock of the COVID-19 pandemic on world trade and investment is apparent in the latest report of the World Trade Organisation (WTO), which expects global trade to fall by an unprecedented 13 to 32 per cent this year.
The WTO points out that all regions will experience double digit declines in trade, which will be worse than during the global financial crisis a decade ago. The global trade body also stresses that there will “steeper falls in products with complex supply chains, such as electronics and automobile products.” This underscores that COVID-19 is both a “supply shock” and a profound demand shock. Finally, the WTO expects a recovery in trade volumes is possible in 2021, but it will depend on the extent of the pandemic and the effectiveness of policy measures to address the shock.
Even as global trade might recover within a year, there are potential medium-term effects from the COVID-19 pandemic, notably, around supply chains and associated cross-border investment. It’s challenging to map out the impact of COVID-19. But the supply chain disruptions are on the back of a tense period of trade restrictions and during a time when additive manufacturing (i.e., 3-D printing) have contributed to an emerging trend towards greater localisation of supply chains.